Pakistan’s Current Account Deficit Narrows Sharply to $98 Million in August 2026

Karachi — Pakistan’s external balance demonstrated significant resilience as the monthly Current Account Deficit (CAD) contracted sharply to $98 million in August 2026, down 78% month-on-month from $445 million recorded in July 2026. Official data released by the State Bank of Pakistan (SBP) highlights that strong worker remittance inflows and steady export growth offset a surging import bill, providing crucial relief to the nation’s balance of payments.

Compared to the same period last year, the monthly shortfall narrowed by 69.7.3% from the $324 million deficit registered in August 2025. Cumulatively, during the first two months of the current fiscal year (2MFY27), Pakistan’s current account deficit stood at $543 million, marking a 36.3% reduction compared to the $853 million deficit incurred in 2MFY26, according to official economic indicators compiled by Dawn News Financial Analysis.

Key Drivers Behind August 2026 External Account Performance

1. Robust Remittance Inflows as the Core Anchor

Overseas Pakistani workers remitted $3.656 billion during August 2026, registering a 16.5% year-on-year (YoY) increase compared to $3.14 billion in August 2025 and a 0.7% month-on-month growth over July’s $3.63 billion.

• Saudi Arabia: Remained the largest contributor, accounting for $873.5 million (+19% YoY).
• United Arab Emirates (UAE): Inflows rose to $749.8 million (+17% YoY).
• United Kingdom & EU: Remittances from the UK totaled $563.7 million (+22% YoY), while European Union corridors dispatched $496 million (+7% MoM).
• United States: Inflows reached $308.9 million (+16% YoY).

Cumulative remittance inflows for 2MFY27 reached $7.29 billion, representing a 14.7% YoY increase from $6.36 billion recorded during the same period in FY26, as reported by Express Tribune Business.

2. Trade Balance and Import-Export Dynamics

• Exports of Goods & Services: Reached $3.33 billion in August 2026, reflecting a 5.0% YoY rise compared to $3.17 billion in August 2025.
• Imports of Goods & Services: Expanded to $6.64 billion, an increase of 8.0% YoY from $6.15 billion in August 2025, driven largely by essential industrial raw materials and energy imports required to support ongoing economic revival.

Macroeconomic Comparison Matrix: Current Account Breakdown

The table below illustrates the shift across key trade and primary income metrics for Pakistan’s balance of payments, as monitored by Trading Economics – Pakistan Balance of Payments:

Economic Metric	August 2026	July 2026	August 2025	2MFY27 Cumulative	2MFY26 Cumulative	YoY Shift (%)
Current Account Balance	-$98M	-$445M	-$324M	-$543M	-$853M	-36.3%
Worker Remittances	$3.656B	$3.630B	$3.140B	$7.286B	$6.353B	+14.7%
Total Exports (Goods & Services)	$3.330B	$3.180B	$3.170B	$6.510B	$6.120B	+6.37%
Total Imports (Goods & Services)	$6.640B	$6.520B	$6.150B	$13.160B	$12.380B	+6.30%
Foreign Exchange Reserves (Excl. CRR)	$17.280B	$16.900B	$14.520B	$17.280B	$14.520B	+19.0%
Net Foreign Direct Investment (FDI)	$315.9M	$185.2M	$175.1M	$501.1M	$342.0M	+46.5%

Exchange Rate Competitiveness & FDI Momentum

REER and NEER Movements

Alongside the current account update, SBP data revealed that Pakistan’s Real Effective Exchange Rate (REER) index recorded a minor increase of 0.02% MoM, reaching 107.92 in August 2026 compared to 107.89 in July 2026.

Meanwhile, the Nominal Effective Exchange Rate (NEER) index depreciated by 0.79% MoM to 38.02 in August from 38.32 in July. While a REER above 100 indicates mild export price pressure, analysts cited by Reuters Global Markets note that exchange rate stability has helped maintain import predictability without severely penalizing key manufacturing sectors.

Surge in Foreign Direct Investment

Net Foreign Direct Investment (FDI) inflows saw a sharp increase, totaling $315.9 million in August 2026—an 80.4% YoY expansion compared to $175.1 million in August 2025. Key capital inflows targeted energy, telecommunications, and infrastructure projects, underscoring rising investor confidence supported by ongoing fiscal discipline and structural economic reforms monitored by Bloomberg Markets.

Macroeconomic Implications & Policy Outlook

1. Foreign Reserve Buffer Expansion: Total SBP-held foreign exchange reserves (excluding CRR/SCRR) expanded to $17.28 billion, an increase of 19% YoY. This build-up strengthens Pakistan’s external liquidity buffer, providing over 2.6 months of import cover.
2. Impact on Monetary Policy: The narrowing CAD and stable exchange rate dynamics offer the State Bank of Pakistan headroom to maintain a measured monetary easing cycle, encouraging domestic capital formation without reigniting demand-pull inflation.
3. IMF Program Benchmark Compliance: Lower current account vulnerabilities position Pakistan favorably for ongoing review under international financial assistance programs, ensuring sustained access to multilateral funding channels.